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The Joint Venture Agreements
The Joint Venture Agreements
Newbury Venture Capital Limited (NVC) was registered as proprietor of title numbers GM 514222 and GM 554260 on 14 April 2014. On the same date a first charge in favour of Lancashire Mortgage Corporation Ltd was registered against both titles. In anticipation of development, which was to be known as Springbank Gardens, the land was divided into a number of plots, most of which straddled both registered titles.
On 22 July 2014, Ms Ziga entered into three agreements with NVC on behalf of her company, Sensar Ltd, each described as a “JV [joint venture] Agreement” for the purchase, redevelopment and re-sale of one of the plots (plots 1, 2 and 3). The following day Dr Razoq entered into three JV Agreements in substantially the same form on behalf of his company, Azdar Ltd, concerning plots 4, 5 and 7. Each of the JV Agreements recorded an “investment” of £60,000 (or in one case £40,000) to be used by NVC for the purchase and development of the plot in question, and promised the return of that investment plus a £24,000 profit on the eventual sale of the plot, envisaged to occur within 14 to 26 weeks. A fourth JV Agreement was entered into by Dr Razoq (again on behalf of Azdar Ltd) on 28 August 2014, this time in relation to plot 8 and recording an investment of £35,000 and promising a return of £17,500 with that investment.
Each JV Agreement consisted of two documents which were sent to the respondents together. The first was a covering letter on NVC headed paper addressed either to “Senada Ziga (Sensar Ltd)” or to “Adil Razoq (Azdar Ltd)”, and the second an agreement letter of the same date (again on NVC headed paper). The extracts quoted below are from the versions sent to Ms Ziga, but those sent to Dr Razoq differed only in the name of the addressee and some of the figures.
Each covering letter identified a plot number and both title numbers as the subject of a “Joint Venture”. The writer, Brendan Keily of NVC (whose electronic signature was attached to the letter) then welcomed Ms Ziga to “our Joint Venture Scheme” before continuing:
"Once our solicitors HSK solicitors are in receipt of your investment of £60,000 NVC Legal Solicitors who act for you will write to you confirming when security of your investment has been registered against the property at HM Land Registry. HSK and NVC Legal will hold a copy of this agreement and the Loan Agreement on file. A CH1 will be registered as a First Legal Charge against the Property, which will protect your interest and stop the Property being sold without your consent. An updated schedule of profit will be provided to you for approval prior to exchange of contracts with any prospective purchaser.
Upon sale of your JV property we will transfer £24,000 to your Solicitors plus return of your original £60,000 capital. A property account detailing all expenditure and building work cost will be provided prior to exchange of any contracts.
The legal charge will record a longstop date of 12 months before which you cannot seek to enforce the charge for return of your funds in the event of a sale not taking place.
If the legal charge is enforced by yourself, we additionally agree to pay an amount equivalent to 6% per month on your original capital invested in the amount of £3,600 per month.
We envisage re-sale of the Property taking place a lot sooner than this. The projected re-sale time should be 14-26 weeks. […]"
The letter ended by listing the next actions required. The respondents were to sign and return the agreement, deposit, provide confirmation of identity and source of funds, and transfer the agreed sum. For its part “NVC Legal will securitise your investment”. It was common ground that, in this context, “securitise” meant “secure” and referred to the legal charge which was to secure the respondents’ investment.
The second document, the agreement letter, was also signed by Mr Keily and stated that it “forms the legal agreement between us and sets out the terms of the JVA”. Notwithstanding that statement, it is common ground between the parties that the two documents should be read together and that, jointly, they record the terms of the agreement. That understanding was accepted by the FTT, which noted the reference in the covering letter to “this agreement and the Loan Agreement”, indicating that both documents were intended to record agreements; I agree that it is the appropriate way to read the two documents.
The agreement letter continued:
"Newbury Venture Capital will be entirely responsible for the Development, Completion and re-sale of the Property. They will report progress on the project to you each month or as otherwise agreed.
In consideration of you today transferring the sum of £60,000 ("Investment") to NVC Legal it is hereby agreed that the Investment shall be used towards the purchase & development costs of the Property. The investment is to be securitised against the Property by a CH1 First Legal Charge at HM Land Registry until the Property has been sold or until 22nd July 2015 whichever is sooner.
We hereby agree to pay you upon resale of the Property £24,000 and your original investment of £60,000.
Your investment is made with full knowledge and acceptance that the investment will not be returned to you until the Property has been sold save that where this has not occurred by 23rd July 2015 then … upon receiving notice in writing from you of your desire to realise your investment we will refund your investment within 10 working days of expiry of such notice. Upon receipt you will sign such deed or documents to release the legal charge over the Property and acknowledge that no further monies are due from us to you and the JVA has been terminated and there is no further liability from us to you. It is agreed that in the event of no sale by 23rd July 2015 your legal charge may be enforced. You will receive £60,000 plus £3,600 per month until sale completion."
The form CH1 which was referred to in both parts of the agreement provides an option for the borrower to apply to enter a restriction but does not require them to do so, and granting a charge in form CH1 does not by itself impose an obligation on the borrower to obtain the consent of the lender before a sale.
The agreement letters were signed by the respondents who then advanced a total of £375,000 to NVC. Although the agreement letter refers to CH1 charges and to a “legal charge to be signed with this agreement”, no such charges were ever entered into. The covering letter also refers to “NVC Legal Services who act for you” but the FTT found that there was no evidence of communication between them and the respondents or that they ever gave any advice to Dr Razoq, Ms Ziga or their companies.